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For Your Information:

To all members, affiliates and organizations,
Please post the following message on your websites and distribute to any organizations you feel appropriate. We would especially like to invite organizations to join us in our suit. Please see information below.

Know that there are a number of other cases aside from Bedell, specifically, of a general long-standing anti-trust conspiracy to fix prices and they appear to have good evidence. These cases help our suit, which at the onset appeared hopeless, but with these other cases our suit keeps looking better and better with all the earmarks of success.
Thank you,

Carol Jensen, Executive Coordinator
FORCES International

For Posting:

FORCES is filing a Friend of the Court brief, supporting the request that the U.S. Supreme Court review the decision of the 3rd Circuit Court of Appeals in Bedell.

Both the FORCES case and the Bedell case seek to nullify the $206 billion settlement of the cases the states filed and for which smokers pay.

It is important that the U.S. Supreme Court hear the smokers' point of view. FORCES would be pleased to have any smoker's rights, libertarian, etc., group join us on the Friend of the Court brief. Contact our attorney by 17 Oct. '01:

D O N A L D W . R I C K E T T S
Attorney at Law
28855 Kenroy Ave.
Santa Clarita, CA 91351
Phone & Fax: (661) 250-3091


October 14, 2001


FORCES, et al. v. State of California, et al.,
U. S. District Court (no. Dist. Cal) Case No. C.99-0607 MJJ

The above lawsuit was filed in federal court in San Francisco on February 9, 1999, on behalf of four smokers' rights organizations and 350 individual smokers. It sought to roll back the $206 billion in price increases on cigarettes that resulted from the settlement of the lawsuits brought by 46 states against the major tobacco companies to recover health-care costs and other monies.

The suit, and others filed independently by other persons and groups around the country, argued that it was illegal for the states to allow the tobacco companies to pay for the settlement by passing on the costs of the settlement to the consumers. In the original complaint in this case, plaintiffs argued, primarily, that the price-pass-through provisions in the Master Settlement Agreement (the "MSA") violated the civil rights laws of the United States in a variety of ways. Shortly after suit was filed a number of analyses of the MSA were published which plainly demonstrated that the MSA violated the antitrust laws by setting up an illegal price-fix and illegal output restriction. A motion was then filed with the court to amend the complaint to add an antitrust claim.

The defendants (the states and the four major tobacco companies) filed a motion to dismiss the case. The court (Hon. Martin J. Jenkins) granted the motion to dismiss and held that it would be futile to allow an amendment to the complaint because smokers could not, under the law, sue on antitrust grounds. The ruling was appealed to the Ninth Circuit Court of Appeals which ruled, in July, that Judge Jenkins was correct in dismissing the civil rights claims but that he was wrong in holding that smokers could not state an antitrust claim. The case was sent back down to Judge Jenkins. Of all of the cases that were filed around the country attacking the MSA, the FORCES case is the only one that is still alive; all of the others were dismissed by the lower court and the dismissals were upheld by the appellate courts.

But in one of the other cases (Bedell, filed in Pennsylvania federal court) the Court of Appeal held that while the tobacco companies could not be sued on antitrust grounds, the states could be. Bedell, however, had not sued the states (only the tobacco companies) and the court of appeal opinion ended the case, but set the stage for an appeal to the U.S. Supreme Court.

On October 17, FORCES (and other organizations) will file an amicus brief (a friend of the court brief) urging the Supreme Court to hear Bedell and reverse. On the same day a motion will be filed with Judge Jenkins to allow the filing of the amended antitrust complaint. Finally, Michael McFadden (a FORCES member) and others, will file a separate action on behalf of smokers in Pennsylvania. A coalition of attorneys, organizations and individuals is now working closely together in this push to try and get relief for smokers from the very clear wrong that was done to them..

If the suits are successful, and they now look very promising, the MSA will come undone and the bonds which several states sold, backed only by the expected future payments from the settlement, will be worthless. More importantly, the burden of the settlement will be lifted from the backs of smokers and placed back onto the tobacco companies. It may be that smokers will be entitled to refunds for the price increases they have paid.



10/10/'01 Why Leonard Violi Scares Tobacco Bondholders: Rates of Return By Walden Siew

New York, Oct. 10 (Bloomberg) -- Leonard Violi's dream day in court would be a nightmare for tobacco bondholders.

The attorney at Windels, Marx, Lane & Mittendorf plans to petition the Supreme Court this month to hear an antitrust case that could unravel a $206 billion tobacco settlement that backs $4.6 billion of bonds sold by municipalities. If the court sides with the lawyer, who represents two small tobacco companies, the governments may lose access to the settlement money, which is the sole source of repayment for the bonds.

``There's a gaping hole in the master settlement agreement,'' Violi said from his Upper Manhattan office. He says the court may decide whether to hear the appeal by year-end.

Violi has gotten the attention of Josh Gonze, an associate portfolio manager at Thornburg Management Co. in Santa Fe, New Mexico. Gonze recently sold half of the $2 million worth of tobacco bonds in the $1.8 billion portfolio he helps manage. He also has passed on the last 14 tobacco bonds sold by governments, in part on concern the legal challenge will undo the settlement.

``We have an entire segment of the bond industry that could collapse, affecting millions of people,'' Gonze said. ``Investors should be concerned.'' If more investors become concerned, tobacco bond prices could tumble.

That would drive up yields that already are higher than those on similarly rated municipal bonds because of concern tobacco companies' revenue is shrinking as cigarette consumption falls. High Yields Consider Erie County, New York, for example. In 2000, the county sold $246 million in tobacco bonds. The maturity due in 2006 now yields 3.71 percent, 27 basis points more than the 3.44 percent average yield on 5-year muni bonds with the same single-A credit rating from Standard & Poor's, according to Bloomberg data. Erie County is one of 21 states, cities and counties that have sold bonds backed by funds from the settlement. The payments, which will be made in perpetuity, are expected to generate $206 billion over 25 years. In the meantime, municipalities have sold bonds to gain access to the funds, which they have used to pay for everything from health care programs to public works, to budget shortfalls. New York City was the first, selling $709 million worth of tobacco bonds in November 1999. Iowa will be the newest issuer. The state plans to sell $630 million in tobacco bonds this week. Salomon Smith Barney will underwrite the bonds.

The 1998 settlement obligated the four biggest American tobacco companies and others to pay 46 states for the cost of smoking-related illnesses. To help the firms make the payouts, the settlement allowed them to raise prices and protected their market share by fining smaller companies that boost production. That's where Violi comes in. He argues the settlement enforces collusion among the four biggest tobacco firms, which combined have a 96 percent market share, because it doesn't let his clients, A.D. Bedell Wholesale Co. and Triangle Candy and Tobacco Co., and other small tobacco firms freely increase production. ``The restraint of trade is not protected,'' Violi said. He is taking the case to the Supreme Court after the U.S. Court of Appeals for the Third Circuit in Philadelphia dismissed it in June. Violi says the Philadelphia court's ruling left him an opening to appeal the case to the Supreme Court.

There have been scores of other cases against different parts of the settlement. Those ruled on by courts were dismissed. `Good Chance' Legal experts say Violi's case is strong. ``The plaintiff has an attractive case,'' said Richard Dayne, a law professor at Northeastern University. ``If the Supreme Court had to hear the case, they would have a good chance of getting a reversal.'' Yet Dayne says the court likely will decide not to hear the case because it threatens to weaken the finances of local governments. `No court is going to do that unless they have to,'' he said. ``There's too much at stake.''

Many investors agree as they line up to buy Iowa's bonds. ``There's always people telling you that the sky is falling and attorneys who think they can poke holes in the settlement,'' said Rich Stein, a senior portfolio analyst at OppenheimerFunds, which manages $5.5 billion of municipal bonds. Stein said Oppenheimer plans to buy some of Iowa's bonds. Gonze said Oppenheimer and other buyers are making a mistake. Their ``degree of confidence in the settlement agreement is too high,'' he said.

The nine Supreme Court justices will be the judges of that.